DC Council sells its citizens down the river

Washington, DC minimum wage is $8.25 per hour, already higher than most states across America. District residents are poorly served by low-priced big retail stores. For several years, a sequence of mayors has tried to lure Walmart to the District. Three Walmart stores are currently under construction. Three more are planned.

Yesterday, the DC Council vented its hatred of Walmart by passing new legislation by an 8 to 5 vote. The Council Bill would raise the minimum wage on retailers with stores of at least 75,000 square feet, requiring that such retailers must pay a minimum of $12.50 per hour. Except that all existing big retailers and unionized retailers – like Safeway and Giant – are exempt from the hike. Only Mayor Vincent Gray’s veto stands in the way of this discriminatory legislation.

Walmart has responded immediately by cancelling the three newstores, should the bill become law. It is reviewing its contracts to determined whether to abort the three stores under construction. No wonder Congress is more than reluctant to grant DC statehood. What manner of corruption and ineptitude would follow when an electoral majority is completely devoid of forward-looking intelligence

When it comes to macro-economic forecasting, LSE failure breeds LSE success

“During a briefing on 5 November 2008 – conducted with big wall-chart graphs – about the ongoing ‘financial crunch’, the Queen dropped a (bombshell) question on the assembled throng of academics. ‘If these things were so large, how come everyone missed them?’ The venue (the LSE) was certainly a highly pertinent place for the Queen to ask the question about macroeconomic forecasting, as in the previous year (2007-8) the LSE had been the largest single institutional recipient of UK taxpayer finance for economic/econometric research funnelled via the Economic and Social Research Committee (ESRC a quango, 100% taxpayer-financed). Moreover, it is now openly admitted by a leading (and Nobel laureate) economist at the LSE, Professor Christopher Pissarides, that he and others at the LSE (and elsewhere) had failed to foresee the nature, timing and severity of the crunch.

what has the ESRC actually done?…at an (announced) cost to taxpayers of 5 million pounds sterling, it has set up a new Centre for Macroeconomics, based on LSE and chaired by Christopher Pissarides, but also encompassing (we are told) University College, London, Cambridge University, the Bank of England, the NIESR, and ‘other leading global institutions’ (read a charmed circle of selected insiders’. John Burton, http:// http://www.iea.org.uk/blog/more-macro-quackery

LSE has learned well how to make big money out of its major intellectual failures. Would this happen if the monies had to be raised from private sources? What do you think, dear readers.

English history offers a parallel for Egyptian political reform (2)

In 1689, an unconstitutional English Parliament (unconstitutional because it was not called by the King) met and wrote a new constitution (the original constitution was unwritten). The Bill of Rights narrowed the discretionary power of the monarch, increased the independence of the judiciary, in all but name eliminated any notion of the divine right of kings, and significantly increased the powers of parliament. Most importantly, the suffrage was strictly limited to some 5 per cent of the male population (women had no suffrage until the early 20th century). A high property requirement was set in place for any person to vote. Members of Parliament served without pay, unless appointed as members of the Cabinet. King William III and Queen Mary II were required to sign this Bill of Rights before they could jointly access the throne.

This new constitution significantly reduced the arbitrary discretion of the monarch. Equally important, it set in place a parliament that would firmly establish and enforce property rights, thus paving the way for the Industrial Revolution. Britain became the richest and most powerful nation on the planet, building an Empire on which the sun would never set. Slowly, over time, the suffrage was allowed to expand, until in 1884, individuals without property were allowed to vote. This opened the gates to socialism and to the decline and fall of the British Empire.

Egypt is not yet ready for such a transition. Poorly educated as much of its population is, and subject to Islamic religious fanaticism as one-third of its population, surely is, there is no immediate prospect of establishing and maintaining an effective secular parliamentary system.

So the military, for the time being will have to govern. Since senior members of the military are at this time the primary holders of property in Egypt, this should ensure that an effective system of property rights will be established. If the military is far-sighted, I recommend that tit follows the example set by General Augusto Pinochet in Chile when he seized power from an incompetent and socialist President Allende. The General called in free-market Chilean economists trained at the University of Chicago by Milton Friedman, George Stigler, Gary Becker and Arnold Harberger to reform the economic institutions of Chile. Remarkable success followed. When the General voluntarily stepped down from power and returned Chile to democracy, the country was the richest in Latin America, and remains so to this day. This time around, it may not be so exclusively the Chicago-boys that are called to service – Chicago unfortunately is no longer an uncontaminated citadel of free-market economics. Other universities – such as UCLA, George Mason University, New York University, and Clemson University – may have to supplement Chicago supply.

While so ruling, the Egyptian military should ensure that all young Egyptians, females as well as males, receive a secular education. They should ensure that the job market is open equally to females as well as to males. They should offer stability of rule for a time-period sufficient for wealth-enhancing institutions to emerge. This may take five to ten years of transition governance.

The military should then write a new constitution for Egypt, modeled closely on the United States Constitution. A strict separation between Mosque, Church and Temple on the one side and the State on the other side, should be imposed. As in 1787, the suffrage should be strictly limited by a property requirement, albeit allowing females equal access with males to the ballot box. The secret ballot should be required. The initial suffrage should be restricted to no more than ten per cent of the adult population. Voters should satisfy both the requisite property requirement and (possibly) should be limited to individuals with university degrees and equivalent professional qualifications.The judiciary should be completely independent from the executive and legislative branches of government.

Then the world would truly marvel at the high rate of economic growth and economic freedom achieved by an Egypt unfettered from the bonds of autocracy and backward-Muslim religious fanaticism.

Cause for concern this Independence Day

Lovers of freedom in the United States will rightly celebrate the Fourth of July, as the day when courageous colonists challenged the authority of the World’s greatest military power.They will rightly savor the words penned by Thomas Jefferson, words, that boldly put the People before the State.

Many such American freedom lovers, however, will blend their joy with concern and sorrow at recent trends in the governance of their nation. They are now aware that two United States presidents – George W Bush and Barack Obama – have created a comprehensive surveillance system designed to collect and evaluate every telephone, call, email, twitter and facebook message transmitted by any American citizen. Agents of some of the most ruthless and authoritarian agencies of the federal government make such use as they choose of information so garnered. This is a prerequisite for any effective police state. The network massively exceeds that established by the East German Stasi prior to 1989.

They are now aware that a vengeful United States president, Barack Obama, is so fearful of information leakages that may emanate from patriot Edward Snowden, that he has pulled the airplane of the President of Bolivia from the skies, in order to have it searched for Snowden by agents of a country, Austria, that once willingly merged to become a compliant component of Hitler’s Third Reich.

They will be aware that Julian Assange, another messenger of freedom, is holed up in the Ecuardorian Embassy in London, a refugeee from Obama vengeance, and that the British government is compliantly providing the police cordon that prevents his run from Obama’s hounds of Hell.

So we shall celebrate the memory of July 4, 1776, while mourning the loss of the vision of those Founding Fathers who risked their lives to create a once exceptional Nation.

Egyptian President Mohamed Morsi ousted by military coup

On July 3, 2013, after tanks and troops were deployed close to the presidential palace in Cairo, Egyptian Defense Minister, Abdelfatah al-Sissi appeared on television to announce that President Morsi had been deposed.An army-backed plan for political transition in Egypt will begin immediately with a short period of interim rule before new presidential and parliamentary elections. The coup occurred two years after President Obama bribed the Egyptian military to stand down and allow U.S. ally President Hosni Mubarak to be removed by a popular revolution.

I wonder how President Obama and his three witches – Hillary Clinton, Susan Rice and Samantha Powers-Sunstein – are reacting to this welcome news. After all they were so besotted by the Muslim Brotherhood and its extremist version of Sharia Law that they allowed a loyal ally of Israel to be displaced in favor of an an overtly anti-Semitic government in the most important country in the Middle East. Earlier this week, Obama deflected all relevant questions targeted at his Middle Eastern policy. The U.S. President is either politically clueless or in favor of the implementation of Sharia Law with respect to the governance of this once great country.

News of the successful coup must be largely welcomed by lovers of freedom. Of course, there are risks that the military may attempt to administer the country for longer than they have suggested. That is the nature of an autocracy. However, some autocracies are much to be preferred to some democracies. Egypt is clearly not yet ready for democracy in its effective pluralistic form. If the military, even though motivated solely to raise the value of the many Egyptian assets that it owns, reverses Morsi’s disastrous thrust to socialism, that alone will provide Egyptians with economic freedoms that they desire. Political freedom can wait a while, until the population at large matures and comprehends the nature of the secular choices that should be made at some future ballot box.

The Fed should taper QE3 immediately

At his June 19 press conference, Fed Chairman Ben Bernanke outlined the Fed’s plan to start reducing the pace of bond-buying later in 2013 and to end purchases by the middle of 2014. He conditioned this plan on a substantial improvement in the U.S. labor market, leading to an unemployment rate of about 7 per cent by mid-2014 with an increased rate of economic growth.

There can be no realistic expectation that the U.S economy will deliver on these projections. Over the past 12 months, unemployment has fallen from 8.2 per cent to 7.6 per cent. However, there has been no increase in the ratio of employment to population, no decline in the teenage unemployment rate, and virtually no increase in the real average weekly wage for those who are employed.

The Fed assumes that real GDP will grow by 2.5 per cent during the four quarters of 2013. With a growth rate of only 1.8 per cent in the first quarter and a likely greowth rate of only 1.7 per cent in the second quarter, the growth rate will have to jump to more than 3 per cent in the last two quarters to meet this expectation. And that is well nigh impossible.

U.S. exports are declining in response to weakening demand internationally and to a rising dollar. The Obama tax hike in January coupled to the spending sequester continues to drag down aggregate demand. These effects significantly outweigh the small positive effect on GDP from increased residential investment.

Yet, the market has reacted as if the taper is already in place. As bond yields continue to rise, the aggregate economy will respond in a similar fashion. So it makes a great deal of sense for the Fed to accept expectations and to begin the taper immediately. Such a policy would counter the tendency of investors to seek higher yields in high-risk securities. It would allow normal market forces to return, lifting long-term bond interest rates to the traditional 2 per cent above the inflation rate; or even more, given the debt crisis that continues to overhang the U.S. economy.

‘Do well while doing good’ should be the mantra of an independent Fed. Of course, much depends on the meaningfulness of the word ‘independent’.

Hat Tip: Martin Feldstein, ‘The Fed Shoud Start To ‘Taper’ Now’, The Wall Street Journal, July 2, 2013

Egypt’s President Morsi threatened with army coup

General Sisi today gave President Morsi and his Muslim Brotherhood government forty eight hours to satisfy those demonstrating against his government or to expect an immediate Egyptian army intervention.This follows a rising wave of popular uprisings against Morsi’s attempt to thrust Sharia Law down the throats of a once secular nation. Muslim Brotherhood corrupt socialism has taken the Egyptian economy to the very edge of an economic black hole. Only ill-advised financial support from Qatar stands in the way of this total collapse.

When a political party is voted into office by religious zealots with no understanding of global economics, this is the fate that awaits its under-educated leaders. No doubt the military will force Morsi and his closest advisers into exile, rather than executing them. Wisely the army will restore secular rule to Egypt and make some marginal moves towards a market economy.

However, an enormous burden of responsibility for this disaster rests on the shoulders of President Obama and his three witches – Hillary Clinton, Susan Rice and Samantha Powers-Sunstein – who deliberately cast off a trusted ally when President Mubarak asked for support during the first phase of the so-called Arab Spring. Any serious reading of the Tahrir Square occupation should have advised the U.S. government to leave things alone, and to allow Egypt to take the slow road to democracy.Instead, the Obama administration bribed the Egyptian army to stand aside in order to allow Mubarak to fall.

At a minimum, one might have thought that Obama would have learned the lesson from Jimmy Carter’s stupidity in encouraging a similar fateful upheaval to occur in Iran.

President Obama in turbulent waters steers a boat without a compass

When a president is elected into office on the basis of affirmative action criteria, the nation would be fortunate indeed if the elected official were to be truly competent. The United States has enjoyed no such good fortune. President Obama’s first term clearly demonstrated an exceptional level of incompetence in matters economic and international, the two key functions of any modern presidency.

To achieve re-election, Barack Obama had to run an entirely negative campaign that vilified his Republican opponent, a man of evident success in economic affairs, though inexperienced in matters international. Because he could not run on his record, and would not run on a coherent future policy platform, President Obama returned to the White House bereft of almost any policy program capable of attaining majority support in both houses of Congress.

Six months into his second term, President Obama appears to be completely lost, aimlessly steering the vessel of state in increasingly turbulent waters, without any compass to define his direction. Domestically, his only viable policy is immigration reform and he has abandoned details of any such action to the Congress. His economic policy is in a shambles, unacceptable either to Democrats or Republicans, or any combination of both. His international policies are in ruins, as powers, both great and small, respond to his overtures with varying degrees of open contempt.

If the situation does not change – and effective change appears to be beyond the reach of this diminished administration – President Obama will be remembered only for Obamacare. And Obamacare promises to be the most disastrous program ever unfolded on the United States.

This is what predictably happens when criteria other than past performance and future potential are applied by a majority of an electorate in two successive presidential elections. Eight years of uninterrupted incompetence gives rise to a great deal of ruin in a nation.

Lieutenant Ben (Bligh) Bernanke attempts to round Cape Horn

In 1787, Lieutenant William Bligh set sail from England on the cutter Bounty, headed first for Tahiti, where he was to pick up breadfruit trees and ferry them to the Caribbean where they might produce food for the growing slave population. To save time, Bligh steered the Bounty to Cape Horn, rather than taking the calmer passage around the Cape of Good Hope.

After a month of unremitting turbulence, during which the Bounty was tossed like flotsam by the waves and gale-force winds, Lieutenant Bligh recognized that he would never round the Horn. Instead, he was forced to change direction and to steer his vessel to the Cape of Good Hope. Though reaching Tahiti, and loading his ship with bread fruit trees, Bligh never reached the Caribbean. Instead, his crew mutinied and set him loose on a long-boat allowing him plenty of time to rue his initial directional decision.

Chairman Ben Bernanke now confronts the dilemma of Lieutenant Bligh. Having pursued a relentless path of monetary expansion, designed to socialize U.S. financial markets, this week he determined to round Cape Horn in order to speed up the path to monetary stability. Immediately, Bernanke confronted the savage turbulence of dangerous financial waters together with gale-force political winds from the Obama administration and Democrats in Congress.

In an uncanny projection of the fate of Lieutenant Bligh, President Obama has assumed the role of the Master’s Mate, Fletcher Christian, in signaling mutiny. Ben Bernanke now has no chance of reappointment to a third term. 2014 is to be the end of the line for this loyal servant of the President. In the mean-time, Ben Bernanke has already blinked. After one month of unremitting turbulence, Chairman Bernanke will adjust the rudder and follow the compass to the more peaceful waters of continued monetary expansion.

However, have no doubt that Fletcher Christian will take him down well before the 2014 elections.

Morsi’s Egypt totters on the edge of an economic black hole

When the Obama administration stabbed U.S. ally, President Mubarak in the back, to curry favor with Egypt’s Muslim Brotherhood, it surely could not have expected any outcome other than a Muslim Brotherhood victory at the polls. In this sense, President Obama owns the political-economic mess that now threatens to take Egypt down an economic black hole.

President Mohamed Morsi is an ill-educated religious bigot, typical of the Muslim Brotherhood that he now leads in the aftermath of Egypt’s Arab Spring. He has forced a Sharia-based constitution down the throats of the Egyptian people. He has demonstrated supreme incompetence in his attempt to lead a nation of 85 million people into a new era of prosperity. His personal support across the country has fallen from 58 per cent at his election in 2012 to 28 per cent in May 2013.

Having inherited a bloated and inefficient bureaucracy from his predecessor, Morsi has charged backwards to make it even worse. During the past two years, the budget deficit has skyrocketed to almost 12 per cent of gross domestic product. Cash injections from Qatar, Libya and Turkey are barely providing enough foreign currency reserves to cover three months of imports. The economic slowdown that he has provoked has increased poverty and unemployment with no sign whatsoever of any turn-around.

Investor confidence has totally evaporated and businesses are widely failing amid this foreign currency crunch. Morsi has failed to conclude a loan agreement with the IMF because he refuses to undertake austerity reforms that would start with a reduction in fuel subsidies. The country owes billions of dollars to oil and gas companies. Its sovereign debt and main banks have been downgraded by rating agencies sending them ever deeper into junk territory.

Morsi is a fourteenth-century throw-back president of a backward ruling party. The now only remaining hope for Egypt sadly is a military coup designed to return Egypt to a secular state and to impose austerity-based reforms that alone will pull Egypt back from the black hole that confronts it.

Hat Tip: Heba Saleh, ‘A revolution betrayed’, Financial times, June 28, 2013